Raytheon Storing Missiles Awaiting Motors, Air Force Says

By Tony Capaccio -
Dec 21, 2012

Raytheon Co. (RTN) has put almost 900 air-
to-air missiles for U.S. and allied air forces in storage
because they’re missing a major component -- motors.

The Advanced Medium-Range Air-to-Air Missiles are fully
assembled guidance sections “without rocket motors and they are
being stored at Raytheon Missile Systems awaiting final assembly
as new motors become available,” according to a statement from
U.S. Air Force spokesman Charles Gulick.

The Air Force earlier provided data indicating that the
missiles had been “delivered” through Nov. 30, a quantity
about 900 short of contract requirements. The service didn’t
mention that those missiles were missing their motors and were
still held by Raytheon.

“The Air Force has not actually taken delivery of the
missiles,” the service acknowledged in a follow-up statement.
The missile sections are in storage in Tucson, Arizona, where
Raytheon’s missile systems unit is based, because subcontractor
Alliant Techsystems Inc. (ATK), based in Arlington, Virginia, has had
difficulty manufacturing motors.

The delayed weapons are the newest version of the Advanced
Medium-Range Air-to-Air Missile (AMRAAM). They’re intended for
deployment to U.S. Air Force fighter wings and U.S. Navy air
wings once testing is done and they’re declared combat-ready.

Raytheon has contracted with a second motor manufacturer,
Nordic Ammunition Group of Raufoss, Norway, to work with Alliant
Techsystems on a limited number of motors while building its own
production capability, the Air Force said.

New Company

“I am just now having a brand new company coming up to
speed developing rocket motors to replace a company that has
been unable to produce rocket motors and pass their acceptance
test,” Lieutenant General Charles Davis, the military deputy
for Air Force acquisition, said in an interview today.

“Within the plant at Tucson, they believe they kept to a
reasonable schedule for the original contract to develop
guidance sections,” Davis said.

Since February, the Air Force withheld an estimated $438
million in payments from Waltham, Massachusetts-based Raytheon,
the world’s largest missile maker.

“The reason why there’s been up to $400 million-something
worth” withheld is because “they have not delivered missiles
that I could go kill someone with,” Davis said. “That’s the
only thing I care about.”

‘Can’t Kill’

“If it’s just a guidance section, I can’t kill anybody
with a guidance section,” he said.

Raytheon invested two years ago in developing the Norwegian
company as a second source, and “this fall, Raytheon delivered
more than” 120 missiles, company spokesman Jon Kasle said in an
e-mail.

“This month we are delivering the first missiles” with
motors produced by the Norwegian company, Kasle said. The second
supplier “will be ramping up quickly” to increase production,
he said.

Raytheon continues to produce guidance and control sections
that represent 95 percent of its work on the missiles, Kasle
said.

Davis said the company “will be quick to tell you that 90
percent of the cost of the missile’s in the guidance section,
and they are well on schedule.”

“We do not accept guidance sections,” Davis said.

Raytheon has said that payments shouldn’t be withheld
“because ‘we have made 90 percent of the missile, and they are
stacking up in our warehouse,’” Davis said. “We have not
agreed with that.”

Revised Agreement

On Dec. 11, the service reached agreement with Raytheon on
a revised delivery schedule that lifts the withholding of
payments and triggers an initial $104 million payment that’s now
being processed, according to an Air Force statement.

The $104 million is likely to be paid by Dec. 31, Air Force
spokesman Gulick said. The remaining money will be paid as fully
assembled missiles are delivered, he said.

The company is required to get back on schedule by
mid-2014, Davis said.